The issue of inheritance – how much, when, why, and how to make it equal – all factor into whether or not inheritance will be perceived as fair.
Make a note as to what I just said… Fairness is in the perception of the inheritors. They do not see it from the perspective of the giver – usually the parent(s) or grandparent(s).
A recent article from AARP offers some suggestions which I highlight for you briefly here. However, let me make this very important point, not so much as an consultant/coach to millionaire families but as a son of a multi-millionaire.
Having grown up in a wealthy family I highly suggest hiring a specialist to guide you through the thought process of what makes for an appropriate inheritance. There are just too many blind spots that can derail intentions.
And in hiring a specialist I recommend someone with a proven process, a writer and speaker on the topic, exclusively works with millionaire families and with personal family wealth experience.
Now, to get you started in your thinking before meeting with a specialist, here are some items AARP suggests you think about.
First, manage your heirs’ expectations with open communication. Many children greatly devalue their parent’s estates (most by $100,000 or more). This doesn’t mean you have to be completely transparent regarding your finances, but parents should give kids a basic sense of where they stand. It’s also important to remind them that your financial situation is capable of change should you require extra medical care.
Secondly, try to keep inheritances as equal as possible to minimize fighting. When a parent appoints financial responsibility to a child, they’re saying who they think is worthy, capable, and trustworthy. Distribution among children should be as equal as possible to avoid hurt feelings.
Next, do the distributing yourself. You may name your oldest child as the beneficiary and trust him to divvy it up, but who knows what will happen after you’re gone. If you want all children to inherit equally, state them all as beneficiaries.
If you do want to distribute your assets unequally, the next step is to explain why. Some children may be in better financial situations than the others and are therefore less in need of the money. Be careful, though, as this can cause resentment and regret—the last thing you want your plan to do.
Finally, if there are any concerns as to how your heirs will use the money, consider setting up a trust with a few strings attached (distributing assets to heirs at certain ages, for example). The idea here is that financial decisions will be better made with maturity.
The best advice I can give you when making decisions about passing on your wealth to family is to never go at it alone. Consult an experienced estate planner who really functions like a specialist, to help guide you down a path that is most beneficial to you and your heirs. Your memorable legacy with your family depends on getting wealth transfer done right.